A double standard dandy, scrutiny alerts, when the dust settles, quotable, asset recovery, protection money, and for the reading stack. It’s all here in the Friday roundup.
Double Standard Dandy
Numerous prior posts have highlighted the double standard between enforcement (or lack thereof) of the U.S. domestic bribery statute (18 USC 201) and the FCPA. (See here for the double standard tag with approximately 40 posts).
A leading FCPA practitioner sent me the following lead paragraphs in reaction to this recent New York Times article about alleged corruption in connection with state attorney generals offices.
“Media reports this week exposed widespread practices in which U.S.-based issuers have allegedly retained paid lobbyists to wine, dine, and make huge campaign contributions to the chief prosecutors in numerous foreign countries in hopes of obtaining favorable prosecutorial decisions in those countries, often with apparent success. The DOJ and SEC have immediately launched one of the largest investigations in history to determine whether these activities violated the FCPA, which forbids U.S. companies from giving or promising anything of value to a foreign official in order to gain an improper advantage. If found guilty, these companies could face multi-million-dollar fines and any implicated executives could face years of incarceration.
Oh wait. Never mind. It turns out the chief prosecutors work only for domestic U.S. state governments rather than foreign governments, and thus any tainted decisions would betray U.S. citizens rather than non-citizens living in foreign locations. Nothing to worry about here after all – just keep moving along, citizens.”
Qualcomm’s FCPA scrutiny has been interesting to follow as it represents a rare instance of a company receiving a Wells Notice from the SEC. In its annual report, the company disclosed:
“Securities and Exchange Commission (SEC) Formal Order of Private Investigation and Department of Justice Investigation : On September 8, 2010, we were notified by the SEC’s Los Angeles Regional office of a formal order of private investigation. We understand that the investigation arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of our Board of Directors and to the SEC. In 2010, the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in our financial statements. On January 27, 2012, we learned that the U.S. Attorney’s Office for the Southern District of California/Department of Justice (collectively, DOJ) had begun an investigation regarding our compliance with the Foreign Corrupt Practices Act (FCPA). The audit committee conducted an internal review of our compliance with the FCPA and its related policies and procedures with the assistance of independent counsel and independent forensic accountants. The audit committee has completed this comprehensive review, made findings consistent with our findings described below and suggested enhancements to our overall FCPA compliance program. In part as a result of the audit committee’s review, we have made and continue to make enhancements to our FCPA compliance program, including implementation of the audit committee’s recommendations.
As previously disclosed, we discovered, and as a part of our cooperation with these investigations informed the SEC and the DOJ of, instances in which special hiring consideration, gifts or other benefits (collectively, benefits) were provided to several individuals associated with Chinese state-owned companies or agencies. Based on the facts currently known, we believe the aggregate monetary value of the benefits in question to be less than $250,000, excluding employment compensation.
On March 13, 2014, we received a Wells Notice from the SEC’s Los Angeles Regional Office indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against us for violations of the anti-bribery, books and records and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies. The Wells Notice indicated that the recommendation could involve a civil injunctive action and could seek remedies that include disgorgement of profits, the retention of an independent compliance monitor to review our FCPA policies and procedures, an injunction, civil monetary penalties and prejudgment interest.
A Wells Notice is not a formal allegation or finding by the SEC of wrongdoing or violation of law. Rather, the purpose of a Wells Notice is to give the recipient an opportunity to make a “Wells submission” setting forth reasons why the proposed enforcement action should not be filed and/or bringing additional facts to the SEC’s attention before any decision is made by the SEC as to whether to commence a proceeding. On April 4, 2014 and May 29, 2014, we made Wells submissions to the staff of the Los Angeles Regional Office explaining why we believe we have not violated the FCPA and therefore enforcement action is not warranted.
We are continuing to cooperate with the SEC and the DOJ, but are unable to predict the outcome of their investigations or any action that the SEC may decide to file.”
The other instance of FCPA scrutiny involving an SEC Wells Notice is Cobalt International. Earlier this week, the company disclosed:
“As previously disclosed, the Company is currently subject to a formal order of investigation issued in 2011 by the SEC related to its operations in Angola. On August 4, 2014, the Company received a Wells Notice from the Staff of the SEC with respect to such investigation. On September 24, 2014, the Company responded to the Wells Notice in the form of a Wells Submission. The Company is unable to predict the outcome of the SEC’s investigation or any action that the SEC may decide to pursue.”
When the Dust Settles
It is always interesting to see what happens when the dust settles from an FCPA enforcement action (see here for the prior post). The recent Bio-Rad enforcement action concerned conduct in, among other places, Vietnam.
According to this source:
“The [Vietnam] Ministry of Health has called on police to investigate an American medical equipment manufacturer that has admitted to bribing Vietnamese officials. Health Minister Nguyen Thi Kim Tien filed a formal request on Wednesday with the Ministry of Public Security that asked investigators to determine whether anyone had accepted kickbacks from Bio-Rad Laboratories, Inc. On the same day, the ministry’s inspectors instructed government hospitals to review any purchases from from Bio-Rad since 2005 and submit a report on the issue by November 15.”
Earlier this week, the Supreme Court heard oral argument in Yates v. United States, the case involving a fisherman who was criminally charged with violating the anti-shredding provisions of Sarbanes-Oxley (i.e. “altered, destroyed, mutilated, concealed, covered up, falsified, or made a false entry in a record, document, or tangible object with the intent to impede or obstruct an investigation”) for disposing of some fish.
In this Wall Street Journal op-ed, Bill Shepherd, a partner in Holland & Knight LLP and lead counsel for the National Association of Criminal Defense Lawyers which filed an amicus brief in the Yates case, states:
“[C]reativity in law enforcement should be confined to new strategies for undercover operations, not new, tortured interpretations of laws on the books. […] Congress is often criticized for overregulating and overcriminalizing. But the Yates case is a dramatic example of executive branch overreaching. Just because a prosecutor can file a charge doesn’t mean it is the right thing to do. Prosecutors everywhere struggle with the burden of teaching new prosecutors how to recognize the appropriate use of their authority. Professional groups like the American Bar Association Criminal Justice Section work to help foster that dialogue. Success among colleagues in prosecutors’ offices is measured, as it should be, by the number of convictions and the length of sentences handed down. But the other part of success—more difficult to measure—is the courage to close unfounded investigations or dismiss cases because they are not supported by the evidence, or don’t match an American sense of justice. The ultimate measure of success is the ability to live, work and raise a family in a safe environment—secure in the knowledge that government will not abuse that power with which we entrust it. This must be our universal goal.”
For coverage of oral argument in the Yates case, see here from the New York Times.
Deputy Attorney General James Cole recently delivered this speech at the Third Annual Arab Forum on Asset Recovery.
“Corruption undermines and weakens that which is the basis of modern society – the rule of law. Corrupt officials who put their personal enrichment before the benefit of their citizenry create unstable countries. Corruption siphons precious resources away from those in need at a time when such resources could hardly be more scarce and when the world economy could hardly be more vulnerable. The repercussions of corruption – the hospitals left unbuilt, the roads still unpaved, the medicine undelivered – undermine the integrity of democratic institutions, creating gaps in government structures that organized criminal groups exploit. And as we have seen time and again, countries plagued with corruption become breeding grounds and havens for other criminals and terrorist groups who threaten global security.”
“To underscore the U.S.’s commitment to asset recovery, Attorney General Holder established a Kleptocracy Initiative in the Department of Justice. The Kleptocracy Team includes dedicated prosecutors working to forfeit corruption proceeds and, whenever we can, return those proceeds to benefit the people harmed by the corruption. The Kleptocracy prosecutors are soon to be paired with a dedicated Kleptocracy squad of FBI agents and analysts, and this squad will enhance the capacity of the United States to respond rapidly in investigating and locating corruption proceeds.
The Kleptocracy Initiative seeks to deliver on our responsibility to protect the integrity of the U.S. financial system and its institutions from the destructive influence of corruption proceeds and to deny kleptocrats safe haven to hide and enjoy their ill-gotten gains.”
Speaking of asset recovery, the DOJ announced that it filed a civil forfeiture complaint seeking the forfeiture of $106,488.31 in allegedly laundered funds traceable to a $2 million bribe payment made by a Canadian energy company to Chad’s former Ambassador to the United States and Canada and his wife.
According to the release:
“From 2004 to 2012, Mahamoud Adam Bechir, 49, served as Chad’s Ambassador to the United States and Canada. According to the forfeiture complaint, Bechir agreed to use his position to influence the award of oil development rights in Chad in exchange for $2 million and other valuable interests from Griffiths Energy International Inc., a Canadian company. In order to conceal the bribe, Bechir and his wife, Nouracham Niam, 44, allegedly entered into a series of agreements with Griffiths Energy that provided for the payment of a $2 million “consulting fee” if the company secured the oil rights in Chad. After securing these oil rights in February 2011, Griffiths Energy allegedly transferred $2 million to an account located in Washington, D.C. held by a shell company created by Niam. In 2013, Griffiths Energy pleaded guilty in Canadian court to bribing Bechir. The complaint further alleges that, after commingling the bribe payment with other funds and laundering these funds through U.S. bank accounts and real property, Bechir transferred $1,474,517 of the criminal proceeds traceable to the bribe payment to his account in South Africa, where he is now serving Chad’s Ambassador to South Africa. The current action seeks forfeiture of $106,488.31, which is the current balance of Bechir’s accounts in South Africa. Those funds have been seized pursuant to the complaint unsealed today. The Department of Justice is also seeking additional assets from Bechir and Niam.”
See here for the prior post highlighting the Canadian enforcement action against Griffiths Energy and pondering whether there would be a U.S. enforcement action.
“No US firm will speak publicly of the measures they take to avoid open appeasement of Bedouin claims, but in private conversations, employees of American and European oil giants have spoken of hiring tribesmen for non-existent or unnecessary jobs. Usually they’re listed as security guards or dump truck drivers ferrying sand and gravel, but they seldom turn up to except to collect their monthly salaries. This arrangement has afforded most energy firms a largely hassle-free hand to work in the vast, poorly policed expanses that flank the Nile river.”